Wednesday, December 5, 2007

Can't Sell for Loan Amount, Countrywide Lender; Short sale?

Frank,I hope that your day is well. I have a mortage with with Countrywide and I am trying to sell my home in Warrenton, Va.
Countrywide stated that if I find a buyer who is able to take over my loan then things could be done for them to take it over, or they would have to pay the full payoff value which is more than the assest value of the home.
  1. Is there a way to get any lender to agree to see the home at the assest value of the home?

I did have the home on the market back in the summer but the buyer wanted me to pay the closing cost which I did not have. I am trying to find a way to sell the house without me having to come up with closing cost. Any information regarding this will be helpful. Thanks Alex


Answer to Alex,

First of all, we need to clear up some technicalities in your question. The problem wasn't the buyer asking for closing costs that you didn't have, the problem was the NET (sales price minus closing costs and Realtor fees) was too low. In other words, if the offer was $30,000 higher, I'm sure you would have been able to pay the closing costs.

So the closing costs isn't the issue. The issue is not being able to get an offer that has no closing costs, the issue is getting a NET offer above your loan amount. Otherwise you have bring money to the table to sell your house (literally a check).

Many people in this market want to break even. I even suggested at one point that we have a Break-Even Party! I so frequently hear, "Well, I'd be fine if I just broke even." Geez, you'll settle for not making a profit? How kind of you! Tons of people are losing $10,000 to $50,000 and you'd be happy breaking even?

So the question is actually, "How do I get the bank to allow me to break even?"

It is called a SHORT SALE.

A Short Sale is when the bank allows you to sell a property for less than your loan amount. They take the loss. But keep in mind you have to pay taxes on that loss via a 1099, unless congress passes the Mortgage Cancellation Tax Relief Act, H.R. 3648

But the problem with Short Sales is they aren't getting to closing. Only about 1 in 20 short sale listings close. Sign up for my main blog at as I have an upcoming post on Short Sales being fake. The bank sees the offer and say "Nah, we'd rather see if you will really foreclose." They bank that a certain percent of the owners will find a way to pay and not foreclose. The others that do foreclose, sometimes it is BETTER for the banks vs a Short Sale.

But to do a short sale, you have to prove to the bank that you are broke and facing foreclosure. Sometimes the bank will say, "Maybe, only if you keep making your payments." Then they ignore your calls for 2 months. Why? To get another $3,000 out of you!

So there is no magic bullet to pass your burden onto the bank. You can obviously foreclose. If you are going to do that, you might consider STOPPING payments immediately, save that money and go get a rental before the bankruptcy shows up on your credit report. Please consult a lawyer, as I don't know if there is any legality around doing that.

Best of luck,

Frank Borges LL0SA Broker

(please report typos)

Friday, November 30, 2007

Overbuilding In Alexandria

Question: Frank,
I just finished my design your dream home class, and the teacher (a retired architect) made some helpful comments on our existing 8000 sq ft design. Anyway, my concern is a realtor
said if we build a house thats big and we would want to sell it for $2 mill, we don't want to build it in our neighborhood since no one in that price range wants to live in our area, is that true generally? The guy said everyone looking at big houses wants N. Arlington, Oakton, Mclean or Great Fall.

  1. Do you agree with the guy's assessment of the market generally?
  2. Do you think we are even crazier for wanting to put a nice big new house on our lot?


My Reply:

Jane, From a high level perspective, for the most part he sounds right. Ultimately everything is a function of price. I swear you can sell a 8000 SF place there for $500k overnight, right?
So the real question is what amount of losses might you expect for overbuilding in the neighborhood? You "save" $1M by building there versus a $1M more expensive land option in Great Falls, but you might "lose $300k" since there isn't a market for it.

Yes that new house is more marketable in Great Falls, but the lot would have cost $2M (vs your $800k), and add a $1M house on it and you would have to sell it for $3m in Great falls vs $2M in your area. So it is all relative.

I looked up ALL sales in your zip code 22312. There have been only 7 homes that have asked for over $1.25M. 5 were in Pinecrest, so for one, you are in the most expensive neighborhood in that zipcode.

The two highest started at $1.6M and $1.5M and closed at $1.3 and $1.2.

So yes, building a place that would require a $2M sales price would be a zip code record, and therefore very risky! You bought your house for $900k (maybe worth now $800k). How much is the cost to build what you want to build? Over $700k? Only $400k? All that matters too.

Generally speaking, you've heard that you don't want to have the best house on the block, and that still applies here.

But then again if you have a 10 year horizon, love where you are living, can make it tasteful and not too McMansiony, you might make $300k more elsewhere, but does that really matter?

I personally would never do it because I hate construction. Too many things go wrong, it ALWAYS costs much more, and the mental hasslefactor for doing a one off isn't worth it for me. As a builder that can do 5-10 and have a system in place, great. But making just one, would result in stress and therapy beyond any savings vs just buying (for more) that perfect house elsewhere. Or better yet, RENT! You can get an AMAZING deal renting mansions!

So now I take your question and I flip it around:

You bought in 2005. Are you willing to take a $20,000 to $80,000 loss to sell your place?

The initial gut reaction might be "hell no." But what if you bought a place that was $100,000 or $200,000 from it's high. So effectively you are trading up, fairly efficiently. You could wait until your house is back to break even, but I can guarantee you that the $1.5-$2M that you are looking at now, will have gone up by the same %. Same %, means double the actual dollar amount*. (*yes higher priced homes sometimes have different problems in selling, but you get my point)

Hope that helps,

- Written by Frank Borges LL0SA- Virginia Broker (please report typos)

Sunday, October 21, 2007

Ready to buy. Stafford REOs vs Auctions vs fixer-uppers

I currently live in the NoVA market (well, it's considered that anyhow). We're looking in Stafford County, where we have a 1+ year supply of homes, REOs growing by the day, and it's all leaving me a bit lost as far as "home values" are concerned. I mean, why would I buy a "fixer upper" at $339, when I can go 2 miles down the street and buy a brand new home (similar size, with granite, upgraded cabinets and a finished basement) for the same price (same square footage of main house)?

My budget is pretty small (want to keep the total loan at $250k), but I need all the square footage I can get (in the right places)

We are primarily looking at REOs,
with the thought that in this market, the banks will be a lot less "offended" by a low-ball offer, and more likely to take it. We are headed to an auction in one week (the opening bid is $50k), the house is a REO that has been on the market for over a year (last listing was $339). It needs a *LOT* of work (roof showing wear, all new floors, paint, appliances and bathrooms (UGH!). We don't plan to bid more than $200k for the property, but I don't want to make a huge mistake either.
OR, should I be looking at REOs around $400k that don't need any work and just make low-ball offers to the banks?

If you were my realtor -- what would you suggest I do?
(we have secured financing for a loan that is *much lower* than what we could qualify for. Our total income is $120k, and our outstanding debt is minimal.).

I'd appreciate your advice. I'm not in a rush to purchase and can wait -- but after living in a basement with 2 kids for 4 years, I'd really like to have my own home again!


Hey Lisa,
I know that buying a bank property sounds sexy and all, as if you can get half price or something, but that isn't happening. You would think that banks are jumping all over any offers. Actually the opposite is true. They take sometimes as long as 3 months to reply to offers and they just aren't motivated. It is very strange.
I assume you read my blog about REO & SOL homes? "SOL" Homes defined

As for that auction, let me know how it goes. Most auctions around here are fake marketing tricks. A good auctioneer will get 90% of list. People think they will get a steal and that bids everything up.

If I was your Realtor, I would say to increase your budget by 10%. I know it sounds salesy, but 90% of my buyers have a "what I think is reasonable" price in mind, yet they all have taste buds right outside that "budget." This tries to explain why: Buy Bigger! You’re Only Borrowing It...

As for gut jobs vs fixer uppers vs move in ready, it is a personal preference. I HATE all forms of rehab. The workers never show up, everything costs more, takes longer etc etc. But if you like it, sure you can be better off getting a place in worse condition for a lower price. I tend to steer away from SUPER dumps as they can have hidden problems like mold or needing to be condemned. I'd prefer a place that with $20k you can do wonders to it, with 75% of the budget for the kitchen and bathrooms, and maybe new windows. Consider hiring a stager (normally used for selling) to help renovate your place for less.

Good luck!
Frank Borges LL0SA Broker
(please report typos)
keywords: Stafford homes foreclosures, loudoun, forclosures, foreclosed, foreclosure, Bank Owned, liquidation county fairfax, staging, renovations .

Wednesday, October 17, 2007

Buyers using Multiple Contracts at once?

Question for you about an old blog entry earlier this year (your blog is great by the way). In it you mentioned that having more than ONE offer to purchase out at a time is unethical / illegal. While I agree it is somewhat difficult, I do not think it is illegal. Any offer can be withdrawn before it is accepted, and therefore assuming one is 'fast' they could negotiate multiple offers / counters at the same time and not withdraw anything until an offer is ratified. Of course the buyer runs the 'risk' of having two ratify so close in time that he / she does not get the others withdrawn. But I fail to understand how it is unethical or illegal to do so? Sellers and agents may HATE this of course. Do I have this right?

Hey Joe.
DISCLAIMER: I am not a lawyer. This means you are to disregard anything that I say and verify it with a lawyer. Think of it as me giving you questions to ask them.

Ok, now that I've discredited the value of anything here forward... I believe that there might be something in contract law that requires that an offer be made in good faith, as in the buyer is going into the contract with full intent and i
s wanting to buy THAT place.
And the risks of two places saying yes, is actually pretty huge. With the gray area of what is "delivery" the buyer agent would have to nullify the other offers within seconds of receiving a ratified contract. I personally like to eat dinner,but one hour away from the fax could cost my client thousands.

Yes you might be able to use an "out" like HOA docs, but I believe you might have nullified the contract before that right begins if you have 2 places under contract with no intent to perform on BOTH.

I would have to get more details from a lawyer as to exactly what is legal.
As for ethical, I also believe the the Realtor's code of ethics precludes agents from doing that.

Anyhow, why not just put a 5pm deadline and make the 2nd other offer at 5:01pm? There is nothing wrong with that, and I do that all the time. Or you can make it nullify in an hour and tell them "technically the offer is no longer good, but you can still 'counter' by crossing off the deadline and sending it over." At that point it is a counter (even if the price is agreed to)
In other words
1) Buyers offer $500k for property 1 , deadline in 1 hour
2) Buyer waits 1 hour and puts in an offer on property #2 (after deadline on property 1 passes)
3) Seller of Property 1 signs 90 minutes later (signs, not "ratifies") contract. Maybe crossing off deadline, thus making it a "counter" technically
3) At THAT point, the Buyer:
a) Nullifies offer for property 2
b) Signs counter for property 1 to be RATIFIED

There are ways to do it like that, but I don't like having two outstanding offers, and I won't do it.

Now the quesiton should be "ok, give me HOW you CAN do it" (I hate "no" answers, I like "ok, tell me how I can effectively do what I want to do")

If you are an investor and disclose your intent to use multiple offers, you might be able to put "Purchase is placing offers on multiple properties. This offer is nullified upon acceptance of another offer" that MIGHT fly, but you would have to ask an attorney.

Make sure you subscribe to the blog and pass it on!

Frank Borges LL0SA- Realtor/Broker

Thursday, May 17, 2007

Frank, I read your FSBO blog, but still...

In all frankness (which I know from reading your blog you appreciate), when I first read your email telling me to go read your blog, that thought is what crossed my mind [A-Hole]. But after reading (and then going back and re-reading) your blog and seeing how much effort you put into writing it, I find I agree with you and that it makes sense for someone to read your blog first.

After reading the blog you really have me thinking long and hard about FSBO and now contemplating the possibility that you just might be able to come in and get a bidding war started that would result in a higher "net" for me - which is really what I am most concerned with. One caveat that keeps running through my mind however is that Fairlington seems to be a pretty efficient market due to properties selling all the time, with somewhat of a cap on the top end of what the market will bear. Since my house is on the south side, in a very desirable court off a desirable street (as pointed out by many others, not just my rosy
thinking) and I have done a fair amount of upgrades, I think it would sell near the top of the price range for its model. The question then becomes could you still drive the price high enough to offset the "extra" 3% or 6% so that the net was above what I would get FSBO? If you would care to address that I would not only be most appreciative but it would go a long way towards my full conversion to believing that listing with you would be the smart way to go and could potentially result in a new client for you.

BTW, I think your point about staging is well taken. And in fact I did have a professional decorator/stager come in about 3 months ago who I had make suggestions (paint, etc) and arrange things with an eye towards putting the house up for sale.
Best regards,

Answer/Reply email

Hey Rick,

I certainly would not hire an agent just in case the agent can get a bidding war. That would be a silly longshot, not worth it in any gambler's book.

As for the rest of it, it pretty much is covered in the FSBO blog that you read. If you don't even do the 3% offering to buyer agents, you are cutting out 90% of the potential buying market, and leaving those that are oftentimes bottom feeders that are looking for THEM to save the 6%, not you.

I would recommend that you call an agent's references too, to see what they did for their last few sales. You can gain some invaluable insight into the process.

Also while NET is important, are you putting ANY value in letting the hassle factor and details be taken care of by somebody else?

And the argument that your house being different than other houses, or at the top of the bracket, that doesn't matter. In my biased opinion and experience, a good agent will net you more, regardless of your house. We just had a listing in similar community. Just happened that that day 2 other listings came on with the same floorplan. Ours was a $10k higher starting price than those other listings (nicer too), we got 3 offers, we got it bid up another $5,000 (the seller actually felt bad and didn’t want to go higher) and the other listings got no offers. No shit, true story.

So to answer your question, would you net more? NAR says you will make 23% less, but that is hogwash. Nobody really knows for 100% certainty, or even 80% certainty. I would say that the risk analysis is equal in both directions. You CAN net $10k more with an agent, but you can just as easily net $10k less without proper exposure and a smaller buying audience.

While some might say "can't hurt to try," I disagree with that too. A properly marketed home has to put ALL of its effort into the first few days (the exact best day to list is Wed night or Thurs, and I have MANY reasons for that, maybe I'll blog on it). If you FSBO it first it is hard to properly list it with a Realtor and get the same level of excitement going.

I guess to a certain degree it is like an insurance policy. If you trust your agent to fight to get you top dollar, than you can sit back and relax knowing that you did everything possible to get the highest net.

Or you can take a gamble and see for yourself. You might come back with a "I told you I could do it." or a "You told me so." The gamble is with real money, but the gamble is yours.

I might repost this and remove your name on my , why let an hour long email go to waste!! ;-)


for sale by owner, fsbo, craigslist, flat fee mls, virginia maryland dc

BusinessWeek Blog: "Agent Horror Stories." My response.

Here you can read the BusinessWeek blog:
Anyone have an agent horror story like this one?

Here is my response:

Hey Dean,

Get prepared to get even more ticked off!...

First of all I'm a Realtor, but I hate most Realtors. But you know what they say, in the land of the brainless, the half brained man is king.

Anyhow, first to defend YOU, interviewing multiple agents would have done nothing. What would you say "Do you suck?" What people should do it interview/ talk to their references. See if you get a sense for how well they did. Or even more powerful, ask for their "last 2 clients" so they can't pick and chose their references. Heck I have a reference where I pocketed for the guy $102,000 on the sale and $50,000 on the purchase!

Or you can run my CRA report (trademark pending) where you run a Comparative R. Analysis on the agent's last 10 deals and see how well they did. Do they get list, do they get over list, do they list high, just to drop later?

And that agent that said "Honey you gave away your house," I'm sorry but that happens ALL the time. Ignore her. Agents get jealous that they didn't get the listing, or they don't like the listing agent (maybe lost other deals, etc). If she had a buyer, and she was any good, they would have put their money where their mouth was and made a back up offer.

Ok, now to the part that will piss you off...

You are right, most agents don't fight for that last $10,000 since it makes them only $300 and they would rather use that time to sell another house. (blatant plug: This is how we differentiate, we DO fight for that last $5k and $20k, since it is real money, your money. We don't do it out of charity, or our good nature, we do it to make more money for us, via more future referrals from our clients)

The deal is NOT over when you have it under contract. A good agent will "dial for dollars" when the offer comes in to get more. THEN if it goes under contract, a good agent will STILL work the deal. If he can get a higher back up offer, there are about 10 days to make the back up offer win. All legal and all ethical ways.

For example, if you have a back up offer you can:

1) Reply NO to the Home Inspection items (and don't let the agent pay for it). This might trigger the buyers to walk.

2) Look for Kick-outs. Many people don't understand contracts and how the buyer has contingencies that if not removed in 3 days, can nullify your contract (I am not a lawyer, please consult with a lawyer for details)

As for “getting over it,” that is 10,000, no way! That $10,000 would have gotten you another $50,000 in leveraged buying power for your new home. That $10,000 can buy a nice vacation. That $10,000 can be donated to charity. Heck give half to your great agent! ;-)

I recently had a seller that felt BAD that we fought to get him $7,500 over list. I said "take the money, and donate it to a charity, then you won't feel bad."

Frank Borges LL0SA- Va Broker/ Realtor


"Trust Me, I'm A Realtor"

Sunday, May 13, 2007

Emailed Question: I'm considering selling. What price would you put for my XYZ St house?

Hey George,
We don't quite work that way (but most Realtors do). Have you read any of my blog? I think this question would make for a GREAT blog! I see if I can touch upon the important points here and then do a more detailed blog later.
The problem with taking the approach of asking agents "what would you sell it for" is it results in two things, and both are counterproductive to getting you the highest net:

1) It encourages the agent to come forth with a high price. When I grew up in Real Estate, my parents learned this the hard way. They tended to go with the agent that told them the highest amount. The result was the house would sit and probably end with a price far lower than if it was property priced in the first place (80% of your potential buying pool will see your place in the first week)

Now that I'm on the inside, I see how it works. Agents that are less experienced will fluff the number in order to get the deal, knowing that it is overpriced and the seller will eventually have to drop and the agent will eventually get paid.

2) It encourages a bunch of agents to spend only 15-20 minutes coming up with a price. Instead I like to literally spend 5-10 HOURS getting the information for finding the perfect price. In part by actually going into each and every competing listing (sometimes with the seller). And then together WITH the seller, we come up with a price. That steps occurs AFTER we are hired.

Otherwise I might say "If I could tell you that I could get you $200k over what that other agents said you could get, would you hire me?" the answer might be "yes" and that is exactly why we won't do that. We won't use that trick to get your business since it harms you in the long run. (overpriced listings sit forever and tank faster, resulting in a lower net)

Also I haven't seen inside your home, and the stager will have to take a look too. We won't list a home unless it is staged. (you can read more about this on the blog at ) because it NETs the client so much more, time and time again. The emotional reaction that buyers get when they walk into a place needs to be maximized (cough cough manipulated) to the fullest to get you top dollar.

What I can tell you is that Capitol Hill is hot now. We had one buyer that lost out on five places. So make sure you pick an agent that is good at bidding wars. Bidding wars are VERY difficult and can take 8 hours straight to perform well. Many agents won't hassle with trying to get that last $10k or $20k because the incremental commissions isn't worth it. That is what I pride my firm with, getting our clients a new car because they used us. (we got one place bid up 20%! or $102,000, that was not easy)

Frank Borges LL0SA- Realtor/Broker (can I sign you up? Via Feedblitz, spam-free and not too frequent)
703/827-4006 AIM=FrankLLosa
2003 NVAR Rookie of the Year
$150M+ Personally in 2004-6
Featured in BusinessWeek, WSJ, CNBC, NY Times, Discovery Channel and more.

Monday, March 12, 2007

Rent Vs Buy in Arlington, Email: Help! Need straight answers fast PLEASE

Hi Frank,

I stumbled onto your site and am so glad, especially about helping people decide whether or not to buy. I'm getting so many mixed messages and, based on your site, I think I can count on you to give me some straight, honest answers. I am new to the area and don't really have anyone to help me make such a big decision.

My plan was to buy a house this year, but I wasn't planning on having to move twice (I just moved here from CA last year) - which is a strong possibility as my landlord decided to put the house I'm renting up for sale on 5/7. So, I'll have to move in around 90 days (depending on how fast it sells). To make things worse, I'm in between jobs, so it'll be a few months before I can even put an offer on a house.

My main questions are:
1. I think I can afford a townhouse for $350K-400K and am looking in the VA area within 10-15 miles to DC (the closer the better). My goal is to sell the place in 2-3 years so I can get a single family home (maybe out of state). What do you think is a reasonable range for the expected return in 2-3 years? I've heard anywhere from 5% to over 10% and don't know what to believe.

2. How do I figure out if I'm better off renting - in other words, what is the max I should spend on rent before it makes more sense to buy?

3. Since my goal is to move within 2-3 years, does it make sense for me to put a lower percentage down (like 5-7%)? It seems like that I should put down a lower percentage, but am I missing something?

4. Is there anything you can think of to persuade my landlord to wait another year? I told him everything I read says it makes sense to wait at least till 2008 if he can hold on (which he can, but he had to move to NY so isn't sure he wants the long distance "hassle"). He's only had the house since 6/05. It's in south Arlington (Columbia Forest) and I'm sure he'll put in on the market for over $500K. It's an older house (originally built for military families; has add-ons, needs work).

Thanks so much for any help you can give me,


REPLY FROM FRANK (2 hours later)
Hello Rxxx

Ignore all those Realtors telling you what to do, most are probably trying to put money in their pockets. I'm glad you came to me for straight advice. Thanks for reading my Don't Buy, Ask Why blog.

1) I would not recommend buying a house with only a 2 year hold time, unless you are
  • Getting a REALLY good price 10%+ below market
  • Have a high enough risk tolerance.
  • Own a crystal ball that says homes will increase 10% each year.
Why? Because the marketing reselling fees from those damn Realtors are too high! Closing fees on the purchase AND commissions when you sell will eat up 7-8%.

Here is where people say : "Oh, I don't worry about that, I'll just sell it myself without commission", to which I say "Just trust me on this, from somebody not telling you to buy, if you sell it for sale by owner, FSBO, you will probably net less in my opinion, long story, maybe another full blog.)

As for the expected return, who knows (read my blog on Realtors vs Stock pickers). The only thing that makes people rich in real estate is TIME. You are removing that crucial aspect, therefore you are gambling. Renting is NOT a waste of money (for everyone), read my don't buy blog and watch that video again (kinda cheesy video, sorry)

As for the 5% to 10% that people tell you, um, yes that is what it was historically. But just like stocks it should have the disclaimer "Past performance is not indicative of future results." Who knows what it wil really do. People love to say "but it can't go lower," to which I reply "it can ALWAYS go lower." If YOU are certain that it will go up 5% to 10% each year, then BUY! You would be guaranteed a profit.

Instead I tell people you need to run the numbers with my 1/3rd System
  • 1/3rd chance of it going DOWN 5%
  • 1/3RD chance of it staying flat (and still paying fees!!)
  • 1/3rd chance of it going up
And ask yourself if you would be ok in all 3 of those scenarios (if you say "I'll just rent and wait it out," read the Upside down blog)

2) See above. Also think this way, you aren't going to want to downgrade from where you live now. So if you want the same size and location, it will cost you about 10-20% MORE to buy, and yes, even after the tax relief. So you are 100% gambling on future gains exceeding the 7-8% in fees. One might say you "might" be ok, but is "might" good enough?

3) Putting more or less down doesn't really matter in this case. If you put more down, yes your monthly is lower, but then you aren't comparing apples to apples. You should run the numbers as IF you were doing 100% financing (since if you put 5% down, you have to ask what your money would have been doing otherwise, that is called "opportunity costs"). Another way to put it, if you buy a $400k place and it goes up or down $40k, you will make or lose $40k regardless of putting $40k, $80k or $20k down.

4) Want your landlord to keep it? Tell your him you won't call him for any repair under $200 and you will do direct deposit into his account. The easier you make it for him, the less likely he will sell. As for waiting for 2008 for a better market, I don't know about that, you can read 10 things that say yes and 10 that say no.

HOW ABOUT THIS? Buy your Landlord's house. Do you like his house? Don't think you can afford it? Maybe you can do a Lease / Rent to Own option. Long story on how that works, but it shields you from the downside. If the market goes down, just opt NOT to buy it and only lose a few grand.

Hope that helps.

Again, Renting is NOT the devil that everyone makes it out to be.

Written by, Frank Borges LL0SA- Virginia Broker/ Owner Featured in BusinessWeek, CNBC, WSJ etc.

Keywords: Arlington Virginia homes Metro Clarendon Ballston Courthouse

Sunday, March 11, 2007

New Sub-Blog, Questions Answered.

This sub-blog will showcase common questions from web-surfers or clients (with permission or I'll change their name).

I didn't want to put this on my main blog as I figured it would interfere with the message of that blog. Also who wants to get daily email alerts on stuff like this?

Written by, Frank Borges LL0SA- Virginia Broker/ Owner Featured in BusinessWeek, CNBC, WSJ etc.